Budgeting Basics: Take Control of Your Finances
With inflation creeping up on spending power, your dollars may not seem to go as far as they once did. The good news is that with some straightforward fact gathering and number crunching, you can take control of your finances with a budget. Follow these simple steps to gain insight into your bottom line and develop a working budget that will keep your checking account balance at a healthy level:
Calculate your income
From auto deposit paychecks and moonlighting gigs to social security, investments, and pension payments, figure out how much money you’re bringing in each month after taxes. This might mean logging into online banking and viewing your checking account deposits over the past months to determine an average.
Account for spending
Start with recurring monthly bills – mortgage loan or rent payments; utilities including electricity, water, gas, trash and recycling; auto loan payments; gym and club memberships; internet, cell phone, cable television, and streaming services. These expenses vary in size and scope for every individual – reviewing online banking and credit card statements can help you form a list of these expenses. Don’t forget to include automatic payments into retirement and savings accounts here, as well as any credit card payments.
Next, move on to spending that doesn’t fall into the category of fixed payments. This category includes things like groceries, household essentials including cleaning supplies and toiletries, clothing, restaurant dining, travel, and entertainment. Once again, scanning your bank account statements and credit card bills from the past few months will give you an idea of what’s outgoing.
Create a plan
Finally, add up your spending and subtract this number from your total income – with any luck, you are left with a positive number. If not, it’s time to take a look at needs versus wants and cut costs accordingly. Categories like dining out and entertainment are common areas where overspending occurs.
Developing a balanced budget means not only having enough money to cover all of your spending, but also having a plan to reduce debt over time. If you have credit card debt, you need to cover more than just the minimum payment in order to eliminate the balance over time.
With a bit of planning, budgeting can give you a plan for the future with financial security. Check out these resources for more guidance on creating a budget:
https://consumer.gov/managing-your-money/making-budget#what-to-know
https://www.cnbc.com/select/best-free-budgeting-tools/
https://www.ramseysolutions.com/budgeting/how-to-make-a-budget